A patent owner waited a year too long before trying to disqualify Latham & Watkins from an infringement case involving Amazon.com, a federal judge ruled Thursday.
U.S. District Judge Jon Tigar of San Francisco ruled that Eolas Technologies Inc. knew Latham was representing Amazon since January 2016 but didn’t move to disqualify until early this year. Along the way, Tigar resolved an issue of first impression in legal ethics, applying the law of Texas—where the patent dispute originated—rather than California law.
“When Latham agreed to represent Amazon, this case was pending in the Eastern District of Texas, and Latham would have been correct to expect that Texas ethical codes would apply to any motion to disqualify,” Tigar wrote in Eolas Technologies v. Amazon.com.
The case was transferred to San Francisco this spring, following briefing on the disqualification motion. But under Ninth Circuit case law, a change of venue does not mean a change in law, so Texas law, which is slightly less favorable for disqualifcations, still governed, Tigar concluded.
Eolas was founded during the 1990s by former UC-San Francisco researchers who developed a web technology for viewing digital images that they call the first cloud application. The company won a $521 million patent infringement verdict against Microsoft in 2003. (The case later settled after an appellate court ordered a new trial.) Eolas has since sued Google, Amazon, Walmart, Facebook and dozens of other e-commerce companies.
Latham handled corporate work for Eolas from 2001 to 2006, most of it done by now-former partners David Crumbaugh and Kevin Murphy. “Latham’s prior Eolas work was all-encompassing,” Geoffrey Culbertson of Texarkana, Texas’s Patton Tidwell & Culbertson wrote in a brief for Eolas. Much of the work focused on protecting, enforcing and commercializing Eolas’ crown jewel at the time, U.S. Patent No. 5,838,906. Latham and its lawyers were so enthused about Eolas’ prospects, they invested $200,000 in the company, according to Eolas.
Then in 2012 Amazon and Google teamed up in a Texas trial to invalidate much of the ’906 patent. Amazon was represented then by Weil, Gotshal & Manges, while a Kasowitz, Benson, Torres & Friedman team led by Douglas Lumish represented Google.
When Eolas obtained a narrower version of the ’906 patent and sued Amazon again in 2015, Amazon wanted Lumish, who now works at Latham. Latham didn’t ask Eolas for permission to represent Amazon but did divest its stock holdings in 2014, which Eolas says shows it recognized the conflict of interest.
On the other hand, Latham did nothing to hide its representation. Lumish and three other Latham attorneys formally noticed their appearances for Amazon in January 2016. Latham took discovery and signed joint orders with Eolas counsel at McKool Smith.
Then in January of this year, Eolas executives say, it dawned on them: That was the same Latham & Watkins that represented their company in the early 2000s. Eolas filed its motion to disqualify.
Latham argued there was no conflict, because the representation ended years ago—Crumbaugh retired this year, Murphy left a decade ago, and the two didn’t pass along any confidential information. In any event, Eolas had waited far too long to object, Latham argued. Eolas replied that under California law, it doesn’t matter how long it takes to bring a DQ motion, so long as there isn’t “extreme prejudice” to the other side.
In his order Thursday, Tigar concluded that Eolas executives did know about the conflict long before this year. Tigar noted company founder Michael Doyle and CEO Mark Swords attended a claim construction hearing last November where Lumish and associate Amit Makker were introduced on the record as attorneys “from Latham & Watkins.”
“This fact casts doubt on Eolas’s version of events,” Tigar wrote.
And Latham had billed more than 3,400 hours on the case last year. That amounted to “substantial prejudice”—enough to overcome waiver under Texas law, even if trial is still far off in the distance.
“The court concludes that Eolas waived its right to seek disqualification by waiting one year to file this motion after discovering Latham’s conflict,” Tigar wrote.